Decision details

In April 2022 Bidvest Noonan (BVN) signed a 5-year contract and at the time the hourly Real Living Wage (RLW) had remained relatively static with an increase of 5.5% or from £9.00 per hour in 2018 to £9.50 in 2022.

Between 2022 and 2024 the RLW increased from £9.50 to £10.90 per hour or 14.7%, with the costs were absorbed by BVN.

In 2024/25 the RLW increased from £10.90 to £12.00 or 10.09% and in January BVN requested the value of the contract be increased by £111,687.12 as the most recent increase in the RLW as it would reduce its profit margin to 1% with a significant risk of the contract operating at a loss.
Subsequent discussions have been held and in August 2024, BVN stated that the contract had operated with 4% profit margin and they are only seeking an increase in value to cover the additional costs of the RLW.

Consequently, without an agreement to cover the increased costs of the RLW, BVN state the contract would be unviable and to minimise operating losses would consider providing three months notification of their intent to terminate the contract early.

Whilst the MCA could apply penalties and recover the costs of change, procuring an alternative supplier within a reduced timeframe would risk the quality and value for money of the replacement.

With potential suppliers basing their bids on the latest RLW hourly rate the MCA is unlikely to benefit from a procurement exercise with costs at least equal to that of the request by BVN.

Option 4 - It recommended that a contract change notification is approved to increase the annual contract value of the Bidvest Noonan contract by £188,858.76.

Option 1 - Our contractual position is clear and the increased cost associated with the living wage should be met by the supplier. This option does provide the MCA with financial benefit, but the risks associated do not provide a value for money proposition - not recommended.

Option 2 - BVN to adopt the national minimum wage instead of the foundation living wage. This will contradict the mayor’s commitment to the real living wage and may result in political fallout - not recommended.

Option 3 - Increase the contract value to cover the increased cost of the living wage in 2024 – this would increase the cost to the MCA by £111,687.12 per year until the end of the contract in 2027. However, it would not mitigate the risk OPO 263 - not recommended.

Option 4 - Increase the contract value to cover the increased cost of the living wage, two additional CSAs and a vehicle as part of a mobile response team – this would increase the cost to the MCA by £188,858.76 per year until the end of the contract in 2027 - Recommended.

Option 5 - Increase the contract value to cover the increased cost of the living wage and a total of seven additional CSAs. This would increase the cost to the MCA by £382,113.36 per year until the end of the contract in 2027. However it comes at a significant increased cost compared to a mobile team - not recommended at this stage.