Courier services

Tender description

The contract relates to the provision of ‘social and other specific services’ within the meaning of Schedule 3 of the Public Contracts Regulations 2015 (PCR). DWP intends to negotiate corrections to pricing provisions in the contract (the Contract Variation) with the incumbent supplier. The contract was awarded on 24.1.2019 to Royal Mail Group Ltd following a competition run under the crown commercial service, framework agreement for Courier Services (RM3798) Lot 2 – Secure collection and delivery of sensitive documents and parcels. The contract was for an initial period of 2 years and 1 month (Initial Term) with an option to extend for a further 1 year. The service delivery commenced on 1.4.2019. The contract provides for the delivery of an internal courier service for the secure delivery and collection of courier mail to DWP, such service being vital to the operational delivery of statutory benefits and the other statutory duties of DWP. The core element of the contract provides a fully tracked next day delivery service for its UK network of circa 850 sites. The majority of sites receive a single visit with combined delivery and collection. The service predominantly transports mail items however it also includes the delivery and collection of computer equipment and peripherals. A same day service is also available for ad-hoc urgent deliveries. Courier services were previously provided to DWP on a dedicated courier network basis by a different supplier under a contract which expired on 31.3.2019 (Previous Contract) (being replaced at that time by the current contract). Such dedicated courier network service delivered the majority of mail items on a non-tracked basis. The decision by DWP to change to the courier service model provided for in the contract was taken to improve security of mail items through tracking all items and reduce costs. The value of the contract, as set out in the contracts finder notice published on 13.6.2019, was to be 14 958 802 GBP for the Initial Term. The contract contains various pricing elements agreed between DWP and the supplier, with the 2 main elements being: 1) A fixed price payable for site visits; and 2) A unit price payable for volumes. Volumes under the contract were estimated to be 10 137 412 items during the Initial Term, with 5 164 224 items during the first contract year (DWP did not guarantee any volumes under the contract). These estimates were provided by DWP to the market and were based on all the information available to it at the time and the unit prices for volumes under the contract are based on these estimates. As of the date of this notice, volumes delivered under the contract this first contract year are tracking considerably below the estimate of 5 164 224 items (with 1 404 679 items delivered as of 31.1.2020, being approximately 32 % of the volumes anticipated) and it is anticipated that volumes will remain at approximately this level for the remainder of the Initial Term. A contract management review undertaken between DWP and the supplier has shown that the lower than anticipated volumes has resulted in the supplier’s revenues under the contract being lower than anticipated to date and DWP believes it is likely that the contract value ultimately will be substantially lower than 14 958 802 over the course of the Initial Term, which will adversely impact the supplier’s ability to recover their core costs. It is vital for the logistical operations of DWP that we continue to have a stable courier service and such a courier service is integral to DWP providing its frontline services to claimants. Following the findings of the contract management review, DWP is seeking to negotiate amended pricing provisions through the Contract Variation, with the precise details of such amendment to be finalised (the Price Correction). The Price Correction will mitigate the impact on the supplier of revenues being substantially lower than anticipated due to volumes being lower than anticipated, which should in turn help ensure continuous improvement and quality of performance of services under the contract. DWP does not believe that the Price Correction, based on the volumes delivered under the contract to date and its estimates of what volumes will be for the remainder of the Initial Term, will result in the final contract value for the Initial Term being higher than the published contract value of 14 958 802 GBP. DWP also intends to continue engaging with the market to discuss the future of internal courier services beyond the term of the contract.