Meeting documents

ITEM EX10

EXECUTIVE - 11 DECEMBER 2001

TRANSFER OF THE COUNCILS HOMES FOR OLDER PEOPLE

Report by Director of Business Support & County Treasurer,

Assistant Chief Executive & Solicitor to the Council, Director of Social Services

and Director of Environmental Services

1. This paper summarises the main features of the arrangements that are being proposed for the transfer of the Council’s Homes for Older People to the Oxfordshire Care Partnership (OCP). OCP is a charitable not for profit organisation that has been established as a joint venture vehicle by the Orders of St John Care Trust (OSJCT) and Bedfordshire Pilgrims Housing Association (BPHA). OCP has a Board of Trustees, one of whom is a Council nomination; this is likely to be a member of the Council’s Executive Committee.
2. The decision to transfer the Council’s homes for Older People was taken in principle in June 1998 by the County Council’s Social Services Committee. A Sub-Committee was established to make operational decisions relating to the implementation of this policy. The decisions of the Social Services Committee and the Homes for Older People Sub-Committee with regard to the transfer are summarised at Annex 1. The members of the Sub-Committee also met as a member officer working group to give advice and receive briefings. All issues requiring decision were discussed and decided on at the Sub-Committee. Minutes of the Sub-Committee were reported to the Social Services Committee.
3. The Council appointed PKF as its commercial consultants for the project, and Trowers and Hamlins as its solicitors. The reports of the commercial consultants and the solicitors are at Annexes 3 and 4 respectively. These Annexes are commercially confidential. They set out all the commercial and legal issues necessary for the Executive and the Council to properly consider the proposed transfer, and give the concluding opinion of PKF and Trowers and Hamlins regarding the transfer. The financial evaluation by the County Treasurer is at Annex 2, which is also commercially confidential. Annexes 2,3 and 4 are not available at the time of writing because final negotiations are continuing, but they will be available for the meeting of the Executive and the Council on 11 December 2001.
4. To support the Council and the Executive in reaching a decision on the transfer this report will have been considered at a seminar open to all County Councillors on 7 December 2001. This will have been followed by a meeting of the Homes for Older People Member Officer Working Group, which will consider the briefing given to councillors, and any views expressed by councillors, and will decide on any advice that it may wish to give the Council and the Executive on the transfer. The seminar will include a full presentation on the Annexes to this report.
5. There will therefore be an addendum to this report that will cover as necessary any advice that the Member Officer Working Group would wish to give and will set out any changes to this report or additional items that flow from the final stages of negotiation with OCP.
6. The remainder of this report covers the following areas:

• Background to the transfer;
• The Council’s objectives;
• Summary of the procurement process;
• OCP proposals;
• Monitoring arrangements;
• Alternative options;
• Options within the agreement;
• Action following the agreement.

7. Annexes 2, 3 and 4 (to be circulated later) should be considered in exempt session because their discussion in public might lead to the disclosure to members of the public present of information relating to the financial or business affairs of any particular person (other than the authority); the amount of any expenditure proposed to be incurred by the authority under any particular contract for the acquisition of property or the supply of goods or services; and terms proposed or to be proposed by or to the authority in the course of negotiations for a contract for the acquisition or disposal of property or the supply of goods or services.

Background

8. In summary, the Council currently has 19 homes for older people. At present only 8 meet the building standards that apply under the current legislation, the Registered Homes Act 1984 (RHA 1984). By February 2002 one more home will have been modified to meet these standards, but none of the other 10 unregisterable homes are suitable in any way for modification to meet these standards. The RHA 1984 also gives local authority homes exemption from the standards contained in the Act, which local authorities nonetheless are required to apply to the independent sector.
9. In 1997 the Government published ‘Fit for the Future’, a consultation paper on standards and regulation for residential and nursing care for older people. This made clear that the statutory framework would be changing and that measures had to be taken if the Council wished to maintain the same number of places and the level of service that they gave for older people. It was also increasingly clear that the homes that were below standard were unable to ensure an environment in which care for increasing levels of dependency in older people could safely and effectively be provided. The Council’s financial position, and in particular the demands on its capital programme, has meant that it does not have the resources available to it to carry out the extensive rebuilding programme itself.
10. The Care Standards Act 2000 (CSA 2000 - see below) means that those homes that do not meet the old standards will have to cease to operate as homes for older people by April 2007 and that any new provision will have to meet new, higher standards.

The Council’s Objectives for the Transfer

11. The Council’s objectives for the transfer can be summarised as follows:

• The maintenance of the 800 places at present available through the Council’s homes for older people in Oxfordshire;
• An increase in the number of nursing care and high dependency beds in the county;
• Maintaining the present workforce.
• Gaining access to funds for the rebuilding development programme for the replacement of the unregisterable homes.

12. In reaching these objectives the Council also set out a range of criteria and guidelines against which proposals would be judged (given in Annex 1). The proposals from OCP fulfil or are capable of fulfilling the criteria.
13. Since the decision to transfer the homes was taken there have been significant changes in the statutory, financial and care policy framework for the provision of residential and nursing home care for older people and the funding available for such care. These changes are summarised below.

• The phasing out of Residential Living Allowance from April 2002.

• The introduction of free nursing care.

• The passing and implementation of the CSA 2000.

• Arrangements for funding and providing services.

• Powers for local government to borrow money.

14. The arrangements for the proposed transfer of the homes have been prepared at a time of considerable change and, at some of the stages in the process, uncertainty in the statutory, regulatory and financial framework for residential and nursing care for older people. Nonetheless, the core, fundamental objectives that the Council agreed in 1998 hold true and remain valid. They have been the basis for the work of the Homes for Older People Sub-Committee and officers.
15. There are also local and regional issues in the provision of residential and nursing home care for older people. In June 2001 Social Services Committee considered a report seeking additional resources for the purchase of places in independent residential and nursing care homes in Oxfordshire. This was in response to the clear and consistent evidence of the cost pressures that are being experienced in the provision of these services, mainly from labour costs in the context of full employment in the county.
16. In addition, the level of vacancies in the independent sector is very low. A reduction in the overall level of provision in the County would lead to significant problems in meeting the needs of older people for residential and nursing home care, impact significantly on the NHS, and would lead to price rises as a reflection of shortage of supply.

Procurement Process

17. Expressions of interest were sought during 1999 through advertisements, including advertisement in the Official Journal of the European Community. Following from this 4 organisations were selected and issued with an Invitation to Negotiate (ITN) in May 2000, which was supported by an Outline Business Case. Three submissions were received in September 2000 and following the evaluations carried out by officers, PKF and members, an invitation to submit a Best and Final Offer (BAFO) was extended to Servite Houses and OSJCT on behalf of OCP in October 2000. The invitation was formally published in January 2001. Subsequently Servite Houses withdrew from the process in February 2001 and the Council decided to continue on a single bidder basis. OCP was awarded preferred bidder status in August 2001.

The OCP Proposals

18. The main components of this proposal are summarised below. The agreement between OCC and OCP will be based on a final model which, at the time of writing, is being worked on by OCP and evaluated by officers. This final model will reflect the conclusions to the due diligence evaluations and negotiations that are still taking place at the time of writing between the Council and OCP. The final outcome of these negotiations will be reported to the Executive and the Council in the addendum to this report described in the introduction.

Summary of OCP proposals and evaluation by OCC
Contractual and partnership arrangements	The contract will be with the Oxfordshire Care Partnership (OCP), a registered charity and established as a joint venture by The Orders of St John Care Trust (OSJCT) and Bedfordshire Pilgrims Housing Association (BPHA). OCP will sub contract care services to OSJCT and sub lease the properties to BPHA. OCP only exists to run the contract with Oxfordshire County Council. All profits that OCP makes, once its reserves are at the minimum required level, will be used for the development of services for older people in Oxfordshire, with proposals being decided on by the OCP Board.
Contract duration	25 years, with options to renew.
Property transfer	The unregisterable homes will be let to OCP on leases up to 2007 or leased for 60 years if the site is likely to be required for the initial development programme. Registerable homes and new developments will be on sites leased for 60 years.
Beds and sites	At the end of the development programme it is proposed that there will be 794 places available across 15 sites. OCC will have a minimum block commitment of 559 places. In this proposed approach, 8 of the 15 sites will be new developments. The processes that will determine the development programme are summarised below.
Development programme	There will be a development programme with two stages that can run concurrently and will be completed by 2007. The initial development programme (stage 3) A commitment to build new homes at Wallingford and Banbury. A third initial development has also been confirmed for Didcot, but revised proposals, prepared to meet OCC affordability requirements, means that the Didcot scheme has not reached the preliminary design stages and will have to go through further consultation. The further stage (stage 4) OCP will be contractually committed to producing proposals for the replacement of the unregisterable homes so that sufficient places are available for them to meet the volume requirements outlined above by March 2007. A development model has been received for evaluation purposes only. The Project Agreement also allows for replacement of any other homes during the period of the contract. OCP are required to produce a business case for each development proposal. The proposals will be fully consulted on, and OCC will have the final say on what is developed. The proposed development programme for stage 4 will be considered in the light of the criteria and guidelines that the Social Services Committee considered in September 1998 (summarised in Annex 1) The designs and building specifications that have been submitted at this stage of the process are acceptable and sufficient for the Council to properly evaluate and cost the building proposals. These will be worked up into a "standard" specification with which all future developments must conform. The room sizes are 13.8 square metres plus ensuite facilities of toilet, handwash basin and shower. The OCC specification was for 12 sq m plus ensuite, which is the new national minimum for rooms in buildings registered after April 2002. The proposal to build above this standard is accepted because it gives improved standards, achieves accommodation that is very likely to be satisfactory and registerable for the life of the building, and enhances the capacity of OCP to achieve satisfactory levels of private sales over the life of the contract, which is in the commercial interests of the Council and OCP. OCP and OCC have both agreed to the development and improvement of the services. The contract allows for a change control procedure through which initiatives can be proposed and evaluated by either party. Similarly, there is a contractual procedure for evaluating and consulting upon the reprovisioning of the new homes.
Staff	All staff (767) will transfer under TUPE. Admitted body status to the Oxfordshire local government pension scheme has been agreed for OSJCT, as a closed scheme. OCP have stated that they do not propose to implement any changes to staff terms and conditions as a result of the transfer. UNISON will be fully involved in this review. A recognition agreement between UNISON and OCP will be signed on the date of the transfer.
Services	The OCP proposals meet the OCC requirements in respect of meeting service specifications and standards. OSJCT is an IIP organisation. A very full evaluation of all aspects of OSJCT as a care organisation has been carried out by officers by visits and review of documentation, and members through visits. The OCP proposals give the required levels of beds across the county for all levels of residential care. OCC requirements originally required new provision to be dual registered residential and nursing care. However, It is now recognised by officers that this is not affordable, and registered nursing care will be concentrated in specific homes rather than in dual registered homes. The new registration regulations will impact on the ways in which different levels of need and dependency are able to be met in care homes, and it is accepted that OCP should have the ability to prepare proposals for service delivery that will meet the new regulatory regime. The contract will include the flexibility to do this. OSJCT have been assessed as being able to provide good quality care services. The final numbers of places for older people with serious mental health needs, requiring high levels of one to one care each day (between 3 – 5 hours) will be lower than the 120 originally specified by the Council without specific arrangements being made in the contract. The proposals therefore do not fully meet the BAFO requirements for the levels of care for the most dependent older people with mental health needs, because of the costs attached to this level of care. This can only be resolved post contact.
Commercial	The commercial underpinning for the agreement between OCC and OCP is complex to reflect the needs and constraints that arise from the resources available to OCC, the status of OCP, OSJCT and BPHA as not for profit organisations and the approach to risk that is taken as a result, and the changing policy and regulatory context for the purchasing, provision and development of residential and nursing care for older people. The contract will allow for changes in what is delivered by the contract through the change control mechanisms and the partial termination clauses. These will help the Council to be able to respond to changes, including consultation issues that may arise in the development of proposals to reprovide the unregisterable homes. The commercial arrangements are covered in full in the report prepared by PKF at Annex 2, as set out above.

Monitoring and Service Development

19. A dedicated position of Service Manager has been established within the Social Service Community Care division to undertake the contract compliance and service development requirements for the transferred service. A variety of methods will be used to monitor OCP’s performance, conformity with specifications, value for money and compliance with policy. The service manager will also liaise closely with the National Care Standards Commission inspectors and the Age Concern Advocacy Service. The department is funding the Advocacy Service to support the full and appropriate involvement of residents and relatives in any consultation process regarding the development of the transferred homes and other aspects of the OCP services.
20. As the County Council remains the landlord of the homes, it will monitor OCP’s compliance with the maintenance covenants in the leases and the development provisions in the contract.

Alternative Options to OCP

21. As part of the full evaluation of the OCP bid, work has been done on modelling and costing alternative options that the Council could adopt to reach its objectives. This has included work on how the possible changes of public sector borrowing rules could contribute to reaching solutions. The work on these options is covered in detail in Annex 2.
22. The alternative options (if a transfer does not go ahead) will need to take account of the fact that all unregisterable homes will cease to be exempt from building requirements under the new National Minimum Care Standards after April 2007 and will therefore have to close by April 2007. There will be a staggered closure and sale programme of all the unregisterable sites, which could raise c£10m. Around 440 places will be closed and c400 jobs lost. Redeployment would be almost non-existent because of the lack of alternative council provision for staff to be transferred to on a sufficient scale. Redundancy costs would be high and total c£4m. Abortive costs could be c£0.7m. The Council would be able to reprovide one 80 bed residential home which would cost c£5.2m (land acquisition and building costs). Existing staff would be redeployed into this home, and this has been allowed for in the redundancy calculations.
23. There would be a shortfall of c350 places, to be replaced through purchasing places in the existing independent sector. This would be paid for with the revenue costs available from the closed homes. In analysing the costs of this, the following factors have to be taken into account:

• There are very low levels of vacancies in the independent sector in Oxfordshire;
• There are very significant cost pressures in the sector, and the present purchasing price is not considered sustainable.

24. The conclusion reached is that this option is very unlikely to cost less than the OCP option to achieve the same number of places. It is likely to be unaffordable. It would require new build to create the required capacity, and it is considered unlikely that this would be at a cost less than the OCP proposals. There is no guarantee that the necessary developments would take place, nor that they would meet the Council’s requirements for the development programme.
25. To wait for the introduction of the new capital guidelines, at the earliest assumed date of April 2004, would introduce the risk of there not being sufficient time for a development programme to ensure the provision of sufficient capacity. The systematic closure programme would have to start in 2002/03 to ensure that a difficult process is carried out as safely as possible and could not be delayed. In the circumstances this option is not considered to be viable.
26. For the reasons set out in this section, it is recommended that the arrangements with OCP be accepted as representing the best way open to the Council to meet its objectives.

Options within the Arrangements with OCP

27. It is important to note that the further consultation to be undertaken on the development programme may elicit views or alternative proposals that OCP and the Council would wish to consider and incorporate. This would be allowed for in the contractual arrangements. One such example of this would be sheltered housing and sheltered housing with extra care (‘Very Sheltered Housing’). For some people this would be a realistic and desirable alternative to residential care. Work on these and other approaches to the care and support of older people has been carried out by officers as part of the department’s continuing work on service developments in this area. The arrangements with OCP would allow for alternative proposals to be considered and, if agreed, included.

Action Following the Agreement

28. A detailed transition plan has been prepared to effect the safe and sound transfer of the homes and the service to OCP, should it be decided to enter into the agreement with them. It is intended that transfer should take place at midnight on 20 December 2001.
29. Following the transfer, there will be a period of very active development of proposals for the unregisterable homes, which will have to be consulted on over the spring and early summer of 2002 so that the conclusions reached as a result of consultation can be reflected in the final proposals for those homes. It is anticipated that the Homes for Older People Member Officer Working Group will continue to have a full and active role in advising the Executive over decisions on redevelopments, and in the consultation processes.

Financial Implications

30. The full financial analysis of the proposals will be covered in Annexes 2 and 3.

Staff Implications

31. Social Services Committee and the Homes for Older People Sub-Committee have considered a number of reports on staff consultations. The staff issues have been covered in the main body of this report. The staff in the homes would prefer to stay with the Council, but recognise the reality of the Council’s situation, and also want to see services and jobs preserved. Although anxious about the changes, the overall view is that the transfer should take place.
32. However, the consequences of not transferring now would be very serious for staff morale and it is believed that the impact of this on staff turnover and sickness would be significant and very deleterious.

Conclusions

33. The Council has obligations and responsibilities for the care and support of older people. The proposed arrangements with OCP are seen as being the only viable way open to the Council to meet its obligations and responsibilities, particularly its duty to care. The alternative options do not give a basis from which the Council can reasonably expect to meet its obligations and responsibilities, and are highly likely to lead the Council failing in its duty to care.
34. The final evaluation of the OCP proposals and the conclusions to be drawn will be presented to the Executive and the Council in the addendum to this report, as this work cannot be finally concluded until all the commercial and legal negotiations have been concluded. They will have been considered in the members’ seminar and by the Homes for Older People Member Officer Working Group prior to the meeting of the Executive. Any additional or specific views or issues that signatories to this report wish to record for the Executive and the Council to take into account will also be included in the addendum.

RECOMMENDATIONS

35. The recommendations on this matter will be presented in the addendum to be circulated later.

CHRIS GRAY
Director of Business Support & County Treasurer

CHRIS IMPEY
Assistant Chief Executive & Solicitor to the Council

MARY ROBERTSON
Director of Social Services

DAVID YOUNG
Director of Environmental Services

Background papers: Nil