052/2013 – Approval to award Payroll Services contract – 26 July 2013

Executive Summary and recommendation:

North Yorkshire Police (NYP) approval was granted for the renewal of the payroll contract and Regional Procurement was engaged to provide options and recommendations for the renewal. The purpose of the contract is to maintain NYP’s statutory payroll obligations in the short to medium term whilst ensuring there is no interruption to the provision of payroll services. The recommendation is to remain with the current supplier from an existing procurement framework which will also require an upgrade to the next version of payroll software. This Decision Making Notice seeks approval to enter into a contract with the current supplier for the provision of the payroll contract along with capital funds for an upgrade to the payroll software to ensure the continued delivery of the payroll function.

• That approval be granted to enter into a contract with Midland HR
• That approval be granted for capital funds to facilitate an upgrade to the payroll software as part of the contract renewal

Police and Crime Commissioner decision: approved

Signature Date 26 July 2013
Title Police & Crime Commissioner for North Yorkshire

Part 1 – Unrestricted facts and advice to the PCC

Introduction and background

The existing payroll contract is a part managed contract with the payroll software provided and hosted by the supplier. The contract commenced on 1 April 2008 with Midland HR on a 3 year + 3 year basis with an ultimate end date of 1 June 2014 utilising the Trent 6 version of the software. The payroll contract has enabled the organisation to meet its statutory payroll obligations as well as benefiting from third party IT system management such as patching for statutory payroll updates and functional issue resolution. Approval was granted on 10 April 2013 on Decision Making Notice number 034/2013 to engage Regional Procurement to progress the contract renewal.

Matters for consideration

Whilst cognisance is taken of the replacement of the North Yorkshire Police (NYP) Human Resources system, there are no specific plans to include payroll functionality in the immediate scope of the replacement project. Therefore, in order to maintain the payroll function in the short to medium term the contract renewal process needs to progress to minimise any potential risks to the organisation.

NYP do not have an in-house payroll software product as the supplier provides and hosts the software. The NYP payroll team have direct access to the hosted software to be able to input to the system. In addition, there is no dedicated functional support role in the Financial Services Directorate to enable the resolution of payroll system issues if and when they occur, these are handled by Midland as part of their responsibilities of owning and hosting the software product.

NYP utilise the Trent 6 version of payroll software and the current supplier, Midland HR, have been encouraging all customers to upgrade to their most recent product, iTrent. They have been successful with this with the exception of a few customers including NYP. It is Midland HR’s strategy to migrate all customers to iTrent in the longer term and development of the Trent 6 product (which NYP use at present) has ceased. In March 2013, Midland HR wrote to inform NYP that all software support for Trent 6 will cease on 31 March 2014. In the past NYP has decided not upgraded to iTrent due to business timings and cost implications. As a result of this decision NYP are now in a position whereby, at contract renewal point in early 2014, one or the other of the following will apply:

1. The renewal process identifies a new supplier with a different product meaning the implementation of a new solution. This solution is likely to be a more up to date product than the one currently utilised.
2. The renewal process identifies Midland HR as the successful supplier offering the iTrent product as Trent 6 will be de-supported.

Either way NYP will either have to upgrade to the next version of software with Midland HR or implement an entirely new and more up to date software product.

The original contract end date was 1 June 2014. However, Midland HR sent NYP notification of their intention to de-support the Trent 6 version of payroll software currently used by NYP with effect from 31 March 2014. This means that the following risks have presented themselves to NYP:

3. The de-support of the software means that no further software updates will be added to Trent 6 which includes statutory updates. The impact of this is that NYP will not be able to operate the payroll software accurately for the April payroll and beyond. This includes such as personal tax code changes that happen on an annual basis for the purposes of recovering income tax on behalf of Her Majesty’s Revenue and Customs (HMRC). Fully supported software would be updated to accommodate the changes but this will not be the case for NYP. This presents the risk of incorrect deductions being made from employees and incorrect amounts of income tax submitted to HMRC which has the potential to significantly damage NYP’s reputation as an employer and may also attract sanctions from HMRC.
4. In addition to not being able to perform the routine monthly payroll activities, there is the risk that the organisation will not be able to provide the year end statutory returns to government bodies for the 2013 tax year. For example, final income tax return to (HMRC), due in April 2014.
5. The Trent 6 software de-support notification by Midland HR has shortened the available timeline for the contract renewal work by 2 months thus significantly reducing the feasibility of being able to conduct an open tender or mini competition exercise.

Other options considered, if any

The regional procurement team were engaged to investigate options and provide a recommendation for the payroll renewal. The options and the recommendation provided by Regional Procurement are as follows:

1. Open Tender.
   The timescales are not favourable for this option due to the stages of the work involved coupled with the notification from Midland HR which has shortened the available time for the end to end renewal process by 2 months. If the result of an open tender exercise is that an alternative supplier is selected then there are risks and costs associated with moving away from the existing supplier. For example, data transfer, parallel running time and handover between suppliers as well as training of staff on new software, to name but a few. This option is probably not appropriate, suitable or feasible given that NYP have decided to seek a contract term of 2 years (with options to extend) to allow NYP to evaluate the longer term options for payroll service provision.
2. GPS Framework with a number of Suppliers.
   This will probably require some form of mini-competition and the details mentioned in option (i) above will apply should Midland HR not be successful.
3. Pan Government Framework
   Midland HR is a single source supplier on this framework. This will allow NYP to provide a payroll function with a known service provider. However, this option will mean an upgrade to the Midland iTrent payroll software due to the fact that the current software will become de-supported and will therefore not be fit for purpose from the end of March 2014. This option will negate the risks mentioned in section 2 above and will also offer a timely and short to medium term solution to NYP with minimal disruption to the payroll function, whilst allowing NYP to evaluate the longer term options for payroll service provision.

   As the Pan Government Framework is a legal route to market and has been subject to competition an Exception Paper is not required.

4. Recommendation
   It is recommended that the contract is awarded to Midland HR on the Pan Government Framework as a short to medium term solution for NYP.
   It is recommended that capital funding is made available to facilitate the upgrade to iTrent payroll software as part of the contract renewal work to mitigate the immediate risks to the payroll function.
6. Contribution to Police and Crime Plan outcomes
   The payroll function is a statutory requirement to ensure employees are recompensed in line with contractual obligations under employment law.
7. Consultations carried out
   The contract renewal has been discussed at internal governance forums and a decision made to renew the contract for a period of 3 years with the option to extend for 2 years (ie +1 year + 1 year to allow for maximum flexibility).
8. Financial Implications/Value for money
   The funding for the upgrade project has been identified from a carry forward of existing funds from the Payroll Project as part of the existing Capital and Revenue Development Plan (CRDP). The exception report for this carry forward was presented, discussed and approved at the NYP Resource Systems Programme Board held on 11 June 2013. The funding of the annual costs for the provision of the software, hosting and bureau services is within the current revenue budget provision. The total anticipated costs for the upgrade and annual maintenance over the contract period of 3 years is in the region of £367,000.00.
   The MTFP includes sufficient monies earmarked for the capital cost of the upgrade. The annual revenue budget for maintenance is to sufficient to cover the Annual costs as per this proposal.
9. Legal Implications
   Having read this report and having considered such information as has been provided at the time of being asked to express this view, the Deputy Force Solicitor is satisfied that this report does not ask the PCC for North Yorkshire to make a decision which would (or would be likely to) give rise to a contravention of the law.
10. Equality Implications
    No equality implications are perceived.

Public Access to Information

The Police and Crime Commissioner wishes to be as open and transparent as possible about the decisions he/she takes or are taken in his/her name. All decisions taken by the Commissioner will be subject to the Freedom of Information Act 2000 (FOIA).

As a general principle, the Commissioner expects to be able to publish all decisions taken and all matters taken into account and all advice received when reaching the decision. Part 1 of this Notice will detail all information which the Commissioner will disclose into the public domain. The decision and information in Part 1 will be made available on the NYPCC web site within 2 working days of approval.

Only where material is properly classified as restricted under the GPMS or if that material falls within the description at 2(2) of The Elected Local Policing Bodies (Specified Information) Order 2011 will the Commissioner not disclose decisions and/or information provided to enable that decision to be made. In these instances, Part 2 of the Form will be used to detail those matters considered to be restricted. Information in Part 2 will not be published.

Is there a Part 2 to this Notice – YES
If Yes, what is the reason for restriction COMMERCIAL COST RESTRICTION

Originating Officer Declaration: