Agenda item

Cllr Levy, Cabinet Member for Finance, Property and Transformation, Ian Dyson, Director of Financial and Commercial Services, and Richard Scarlett, Head of Procurement and Commercial have been invited to present an update report on the progress of the Council’s Commercial Strategy.

The Committee is asked to consider the report and raise any questions, and to AGREE any recommendations it wishes to make to Cabinet arising therefrom.

Cllr Levy, Cabinet Member for Finance, Property and Transformation, and Ian Dyson, Director of Financial and Commercial Services, presented an update report on the progress of the Council’s Commercial Strategy.

Introducing the report, the Cabinet Member for Finance, Property and Transformation explained that the strategy had been intended to ensure that the Council’s commercial activity added value to the organisation, supported wider policy objectives, and generated income where appropriate. He highlighted the importance of ensuring that contracts delivered financial and social value, supporting community and environmental priorities through procurement, and identifying commercial opportunities that could support the delivery of services.

The Director of Financial and Commercial Services reported that reasonable progress had been made since the strategy had been approved, although progress had been slower than hoped because of the need to undertake foundational work. The Council had reviewed its operating model, redesigned relevant service structures, strengthened commercial and procurement capacity, and begun to improve contract management arrangements.

Committee members questioned the rationale for the acquisition of the Castle Quarter, noting that many members had been unaware of the initiative because of commercial confidentiality. Questions were asked about the total cost, the source of funding, the relationship between the acquisition and the sale of County Hall, and the consistency of decision making in relation to property assets in the same area.

Officers explained that the opportunity to acquire the leasehold interest had arisen and had been assessed from both a place-shaping and commercial perspective. The Committee was advised that the total capital investment approved by Cabinet was £34 million, covering the acquisition and associated capital requirements. Officers stated that, after borrowing and operating costs, the acquisition was expected to generate a minimum net surplus of £550,000 per year, with the potential for this to increase through commercial management of the asset.

Members asked about the risks associated with the acquisition, including reliance on footfall, rental income, occupancy levels, and the performance of existing and future tenants. Officers explained that due diligence had been undertaken, that market advice had been received, and that a reserve would be established from expected early-year surpluses to provide a buffer if income levels were lower than anticipated. The Committee was advised that four vacant units were expected to be occupied within 18 months and that the Council had protection in relation to income from those units for the next two years.

Members expressed concern that the projected annual surplus represented a relatively low yield against the level of investment and questioned whether the Council was becoming a significant commercial landlord. Officers clarified that the Council was not permitted to borrow solely for commercial gain and that the acquisition had been justified by its wider place-shaping purpose. The business case had needed to demonstrate that the investment would pay for itself and would not become a burden on the revenue budget.

Members also sought further detail on the Council’s vision for the Castle Quarter, the proposed letting profile, the approach to asset management, and the governance arrangements for decisions involving significant levels of expenditure. Officers stated that the acquisition fitted within the wider place strategy for Oxford, including the development of the West End and the role of the Castle Quarter as a gateway into the city centre. In addition, external asset management and property management expertise had been secured to support the operational management of the site.

The Committee discussed how the Council balanced commercial thinking with wider social, environmental and economic considerations. Officers explained that value for money was the key driver and that this included the outcomes the Council was seeking to achieve, rather than simply reducing costs. Members noted the importance of social value, support for small and medium-sized enterprises, environmental impacts, and the wider local economy.

Members asked how the commercial strategy would influence the Council’s approach to LGR. The Cabinet Member stated that the Council could not bind any future authority or authorities, but that councils across Oxfordshire were moving in broadly similar directions by seeking commercial approaches that were financially sensible and delivered social value. Members requested greater clarity on how the strategy would inform the Council’s contribution to LGR discussions and future decision making.

Members welcomed the emphasis on continuous improvement and efficiency but asked whether the use of technology, including an internal AI agent, would lead to internal savings as well as savings from third-party spend and contracts. Officers explained that investment had been made in the commercial and procurement team to establish the operating model and strengthen contract management. It was reported that, as processes became embedded and technology developed, opportunities would be considered to reduce administrative demand and make better use of staffing resources through natural turnover and attrition.

The Committee asked for examples of improved contract management delivering financial or service benefits. Officers explained that the Council had developed a contract management framework and was assessing platinum contracts against it. Examples given included work with the M Group contract and the System C adults’ and children’s social care line of business systems, where relationships and contract management arrangements were being strengthened.

Members asked how collaboration with services, district councils and other partners had progressed. Officers explained that the new operating model had supported closer working with services through a business partnering approach and that collaboration with district and city councils had been strengthened through LGR discussions. The Committee was advised that work was taking place to review contracts and future procurement activity across local authority partners ahead of vesting.

Members expressed disappointment that the commercial dashboard had been delayed, noting that it was important for monitoring performance against key performance indicators. Officers acknowledged the delay and stated that the dashboard was expected to be delivered within the current financial year, although a firm date was not yet available.

The Committee AGREED to make the following recommendations around the following to Cabinet:

1. Better balance between the need for commercial confidentiality with the need for transparency and effective scrutiny, particularly in relation to significant commercial decisions.
2. Provision of explicit information on collaboration with district and city council partners, including how this work supported procurement, contract management and local government reorganisation.
3. The development of the commercial dashboard to be brought forward as soon as possible and that a clear timetable for delivery was provided to the Committee.
4. Practical examples of how implementation of the Commercial Strategy had improved the quality, performance and value for money of Council contracts.
5. Greater clarity on how the Commercial Strategy informed the Council’s approach to LGR and the options being discussed with partner authorities.

The Committee also requested:

-        That, where appropriate and subject to commercial confidentiality, further information was provided on the Castle Quarter acquisition, including the Council’s vision for the site, letting assumptions, risk profile, governance arrangements and opportunities for earlier scrutiny of major commercial decisions.