MD2746 Crystal Palace, National Sports Centre – Contract Extension

1.1. The London Development Agency (LDA) and subsequently GLA Land and Property Limited (GLAP) have occupied the National Sports Centre (NSC) Crystal Palace under a 125 years lease from the London Borough of Bromley.

1.2. GLL were procured by the LDA in partnership with Sport England in 2004 to provide leisure management services at NSC Crystal Palace under a leisure management contract dated 1 October 2004 which was varied and extended commencing in 2009 between the LDA and GLL (the “NSC Contract”). Under The Greater London Authority and the London Development Agency Transfer Scheme 2012, all rights and liabilities of the LDA transferred to the Greater London Authority (the “GLA”) (including the NSC Contract) and in 2014, the GLA transferred all its rights, obligations and liabilities under the NSC Contract to GLAP.

1.3. The NSC Contract has since been further varied and extended in 2014 (MD1236), 2016 (MD1602) and 2018 (MD2126) and is due to expire on the 31st March 2021.

1.4. During that period, GLL have contributed to expansion in the use of the NSC Crystal Palace, increasing the range of sporting activities and have worked with the LDA/GLAP to reduce the financial impact of running the NSC Crystal Palace. They have provided a good level of service, often in difficult circumstances and have provided a level of continuity during what has been and continues to be a period of uncertainty (especially given the added pressures of COVID-19). The pandemic has required quick turnaround times regarding the operation of the NSC Crystal Palace and when the centre has been operational, new operating regimes to ensure the environment is COVID-19 safe.

1.5. The NSC Crystal Palace is over 50 years old and is in urgent need of major capital investment to secure its long-term future as a sports facility for Londoners. A detailed feasibility study and options appraisal, including an outline business case, (MD2220 and MD2526) has found that minimal maintenance is no longer an option. A major redevelopment is required to deliver a commercially viable centre that meets the current and future sporting needs of Londoners. A long list of options has been considered, including the ‘mothballing’ and subsequent demolition of the NSC Crystal Palace, disposal of the asset, and varying levels of capital works intervention; from the minimum required refurbishment to more ambitious redevelopment proposals. All these options would require a significant level of investment or ongoing subsidy.

1.6. The work has progressed through Concept Design Stage, RIBA Stage 2, revisiting and testing the work done in the feasibility study and progressing the designs in more detail. A business plan has been prepared and the project brief has been refined and developed with a focus on the future needs of sport and the community. Alongside this work, several surveys have been carried out to more accurately inform the designs and assumptions made to date.

1.7. The additional work undertaken reasserts that the preferred development option from the feasibility study remains the best scenario to pursue, subject to capital funding being available. This preferred development option was identified through an options appraisal exercise that reviewed the proposals against several factors including value for money, deliverability, social and community output, quality, and sporting value.

1.8. The trend that emerged through the options appraisal was that initial capital investment to consolidate, intensify and upgrade the facility leads to more positive social and wellbeing outcomes as well as offering improved revenue potential reflected in reduced whole-lifecycle costs over a 25-year period.

1.9. A ‘spend-to-save’ strategy for the project remains the preferred route, which demonstrates the affordability of the project and underpins the strategic case with a sound financial argument. The principal of the capital works identified are premised on the ability to spend capital now in order to reduce the continued cost of operating the centre over another building lifetime, and to enable the procurement of a more efficient and effective operating contract.

1.10. It had been anticipated that a decision on the long-term future of the NSC Crystal Palace would be taken in time to allow for a full procurement exercise for the management and operation of the centre to be undertaken and implemented prior to 2021. However, further investigation into some key areas of the design, viability and costings for the development were required to better inform this decision and clarify the availability of capital funding.

1.11. The programme of design development work or the procurement of a new operator cannot progress further without clarity around the availability of capital funding. It is recognised that the funding climate has been further aggravated by the COVID-19 pandemic and associated economic impact and that any funding decisions relating to an additional ask of significant funding is challenging.

1.12. Max Associates were engaged by the GLA Regeneration team through a procurement process (MD2526) for their specialist expertise in leisure management contract procurement in connection with the proposed redevelopment at the NSC Crystal Palace. As such they can provide feedback on the future design of Crystal Palace from an operator’s perspective to ensure that it is fit for purpose, review potential operator models, their suitability and test shadow financial models to inform a future procurement approach. Furthermore, they will support the GLA in drafting the scope of services and tender documentation for the re-procurement of the operator at NSC Crystal Palace given the speciality of the leisure industry and operators that operate within it.

1.13. It is the assessment of GLA officers after considering Max Associate’s analysis that there would be insufficient market interest at this time in a short term (up to two year) contract to provide leisure management services at NSC Crystal Palace to enable a proper competition and that a further short-term extension of the NSC Contract is the most realistic option at this point in time.

1.14. In view of the uncertainty regarding the future demand for the NSC Crystal Palace it would also be difficult to create a specification that could be tendered against. In addition, given the impact of COVID-19, leisure market operators will remain in recovery mode in the short-term, and there will be little appetite for taking on any additional commercial risks. A very clear and detailed development plan and a secured financial profile will need to be in place to secure the best management and operations outcomes.

Extension of NSC Contract

1.15. Pending a decision on the long-term future of the NSC Crystal Palace and commencement of a procurement process, suitable arrangements for running the centre need to be in place and it is felt by GLA officers that the NSC Contract should be extended on a short term basis so the facility can continue to be managed by GLL as the GLA does not have the required skills internally.

1.16. This decision form therefore seeks approval for:

• the extension of the NSC Contract for 12 months from 1 April 2021 with the option for GLAP to extend the contract for a further period of one year; and

• an exemption from the requirements of section 9 of the GLA’s Contracts and Funding Code in order to allow for a short-term contract extension without a competitive procurement exercise based on the reasons stated in paragraph 1.10 and 1.13 above.

1.17. By extending the current contract with GLL during this interim period:

• continuity of knowledge and experience will be preserved;

• work can continue to improve the financial and operational performance of the NSC Crystal Palace while the long-term strategy is developed;

• there will be a degree of certainty for end users which will enable them to make plans for the immediate future. There have been recent signs of progress in attracting major events to the NSC Crystal Palace in terms of volleyball, gymnastics and regional athletics and a secure position at least until 2023 will enable that progress to be built on;

• Max Associates will engage with the market to establish any appetite within the sector for an operational contract at NSC Crystal Palace which will inform any tender documentation; and

• GLAP together with Max Associates, will work with TfL Commercial on the specification and tender process (with a likely period to prepare and run a procurement process being a minimum of 18 months).

1.18. The contract will be extended on the same terms and conditions to those currently in place, with GLAP’s contribution in respect of VAT, utilities and London Living Wage adjusted to reflect current levels of expenditure.

1.19. During the pre-election period officers will be work on a proposal for approval post-election of the expenditure of sums of money in order to undertake key work on the NSC Crystal Palace which will dovetail into the wider regeneration work or begin particular phases of the proposed project.

1.20. Over the next 8-10 months Max Associates will engage with the market to ascertain the likely level of engagement from leisure operators for a full procurement exercise to be undertaken. Consideration will be given to the impact of COVID-19 on these organisations and whether there is capacity for operators to take on a facility of this age and condition. On the back of the advice received it is hoped that a full procurement will be undertaken between months 12 and 24 of this contract extension. See paragraphs 1.25 – 1.28 below for further detail.

Essential maintenance work

1.21. Due to the age of the building and following the completion of recent structural surveys connected with the redevelopment of the NSC Crystal Palace, several items have been identified as essential over the next two years. Appendix 1 to this decision form is a schedule of expenditure for these works which identified essential costs of £534,000 over the next two years.

1.22. Therefore this decision form also seeks approval for expenditure of up to £550,000 (which allows a level of contingency against the £534,000 figure) for GLL to carry out essential maintenance work at the NSC Crystal Palace over the next two years. GLL can manage and instruct these works directly under the terms of the NSC Contract.

1.23. All this expenditure will be considered against the long-term future of the NSC Crystal Palace. This cost is set against an operating model of incurring minimal essential expenditure, while maintaining the premises to an acceptable standard, meeting statutory requirements. Consideration has been given to ensure no expenditure results in work that would be undone by future redevelopment works.

1.24. Officers are aware that essential maintenance is also required to the 50m and diving pools at NSC Crystal Palace. Work is being undertaken at pace and a recommendation will be presented post-election setting out the preferred route for remediation work. Additional analysis on the remedial works are required to ensure consistency with any planned future works for NSC Crystal Palace.

Market testing

1.25. Upon the agreement of future funding (which is currently being reviewed) GLA officers will continue with the wider work relating to the overall future development of the NSC Crystal Palace.

1.26. Within the next 8-10 months, Max Associates will undertake further market engagement with a view to undertake a full procurement of the contract subsequent to this. Max Associates will also support in the tender process by providing specialist support for the drafting of the specification and services required. Within the market engagement work, Max Associates will look to test the market to ascertain the industry’s appetite for the operational contract of the NSC Crystal Palace based upon the current state of the facilities and the recovery of the sector following the impact of COVID-19. The appointment and cost of these services are already covered under their current engagement with the GLA which was approved under MD2526.

1.27. COVID-19 has had such a detrimental impact on the sector it is sensible to ascertain the level of involvement the GLA is likely to receive from interested parties. This assessment will help inform the tender specification and decisions made on the roll out of that aspect of work.

1.28. It should be noted that under MD2526 it was assumed that the operator procurement work Max Associates would undertake would have been able to take into consideration the agreed future development plans for Crystal Palace. This would have facilitated the offering of a longer term for the new operational contract. If the future development plans for Crystal Palace are not confirmed shortly, it is likely that the maximum term offered during this coming re-procurement process will be five years. In that scenario, an additional re-procurement of the NSC contract would be required in 2028 once future development plans have been cemented.

2.1. The primary objective is to extend the current NSC Contract for up to two years, to provide continuity of service while GLAP develops and implements a long-term strategy for the future of NSC Crystal Palace.

2.2. Extending the NSC Contract with GLL will enable GLL to continue to provide services which would allow the centre to continue to provide essential sporting services to the local and wider community in line with the Mayor’s Sports for All of Us policy.

2.3. Furthermore, GLL are a not for profit organisation with any surplus from the contract being reinvested into the centre directly. Due to impact of COVID-19 this has been minimal over the past 12 months but once back up to the pre-COVID-19 levels of service this facilitates a level of reinvestment to customer facing areas. This is in line with the current terms of the operating contract.

2.4. As the NSC Contract is due to expire on 31 March 2021, without extending the contract now the GLA run the risk of having to close the centre.

2.5. Extending the contract will also allow officers to undertake an assessment of the likely success of a full procurement without incurring the costs of undertaking a full exercise.

2.6. The work that Max Associates will undertake for the GLA will inform the basis upon which a tender will be drafted and issued with every intention of re-tendering the contract within the next two years. This is regardless of whether any future decision has been made on the redevelopment of NSC Crystal Palace.

2.7. As the leisure sector has been severely hit from COVID-19 closures and restrictions the industry will be remaining in a state of recovery for some time. Extending the current contract will allow the officers additional time to test the environment before incurring significant procurement costs whilst also informing the full tender documentation to be undertaken within the next 12-18 months.

3.1. Under section 149 of the Equality Act 2010 (the “Equality Act”), as a public authority, the Mayor and the GLA must have due regard to the need to eliminate unlawful discrimination, harassment and victimisation, and to advance equality of opportunity and foster good relations between people who share a protected characteristic and those who do not. Protected characteristics under the Equality Act comprise age, disability, gender re-assignment, pregnancy and maternity, race, religion or belief, sex, sexual orientation, and marriage or civil partnership status (the duty in respect of this last characteristic is to eliminate unlawful discrimination only).

3.2. The GLA will strive to lead by example on creating inclusive workplace cultures, workforce diversity and challenging personal and unconscious bias.

3.3. The NSC Crystal Palace estate is an important sporting and community facility for London and the South East. It supports a variety of sporting pathways, from participation to elite competition, and is host to a range of associated events. The contract extension facilitates this to continue and in a post-COVID world will be even more important once people are able to access the centre again.

3.4. Accessibility of NSC Crystal Palace to those on low incomes with a community access focus being at the heart of the operation. A contract extension will allow this to continue without any disruption in service and be provided by a not for profit organisation.

3.5. All maintenance work required will be undertaken by working collaboratively with consultants and other agencies to promote the value and relevance of Inclusive Design through planning, procurement and commissioning of projects and programmes. This will support the Mayor’s commitment to creating an inclusive city by ensuring accessible and inclusive design is an integral part of public facilities and public spaces, addressing existing barriers to getting around the built environment.

3.6. Engagement and consultation with centre users, key stakeholders and the local community is an important part of the operation of NSC Crystal Palace and work will continue to proactively involve groups who share a protected characteristic, or characteristics, so that their views, interests and opinions are represented and fully integrated into any maintenance works which could provide solutions. This process will seek to identify such opportunities.

3.7. NSC Crystal Palace is an important sporting and community facility for London and the South East. It supports a variety of sporting pathways, from participation to elite competition, and is host to a range of associated events. The work set out in this decision is intended to facilitate that continuation which secures viable and sustainable sports, leisure and community facilities for all South Londoners and beyond, to help Londoners lead safe, healthy, fulfilling lives.

4.1. Risk: There may be some procurement risk associated with the proposed extension of contract.

Mitigation: This is a commercial decision taken against the background of a limited number of parties able to undertake the work given the financial benefits arising from working with a charitable status organisation and the potential for a much large contract being procured in the relatively near future. However, legal advice has been, and will continue to be sought before engaging the market with a view to commencing procurement for a new operational contract next year.

4.2. Risk: Costs exceed those identified resulting in an adverse financial position to that envisaged.

Mitigation: Officers will work closely with GLL to minimise this risk and any additional income could be used to create a contingency fund.

4.3. Risk: Further COVID-19 restrictions could adversely impact works being undertaken, income from the NSC Crystal Palace and the ability to undertake works. This could result in delays and increase in costs.

Mitigation: Officers will work closely with GLL to minimise the risk and ensure COVID-19 working practices are safely implemented with negative impact being reduced.

Link to Mayoral strategies and priorities

4.4. Extending the contract for up to two years, whilst a longer term solution is sought, will ensure that the NSC Crystal Palace can remain open and fully operational; and will also support the Mayor’s objective to “Sustain and promote the rapid expansion of leisure and cultural industries in London.” Facilitating the NSC Crystal Palace to remain open will also support wider Government advice relating to healthy lifestyle and in particular the benefits of this in the wider fight against the Coronavirus pandemic.

4.5. There are no conflicts of interest to declare from all those involved in the drafting or clearance of this form.

5.1. This decision requests approval to extend the contract with GLL for the provision of leisure management services to GLAP for up to two years from 1 April 2021. The previous extension for this contract was granted under MD2126, expiring 31 March 2021.

5.2. The contract is to be extended on the same terms, whereby GLAP is not incurring any management fees and reflecting appropriate adjustments of GLAP’s contribution towards VAT, utilities and meeting the Mayor’s London Living Wage commitment for the years in question.

5.3. Due to the impact of COVID-19 on the leisure sector there is a likelihood of additional support being required from the GLA in order to ensure the centre remains open and accessible to the public and its users. As restrictions are reduced or lifted it is hoped that this liability will diminish.

5.4. This decision also seeks approval for expenditure of up to £550,000 on essential maintenance work on the National Sports Centre over the next two years.

5.5. The expenditure will be funded from GLAP’s resources and the costs associated with both the contract extension and the maintenance works have been included in the draft GLAP budget and business plan for the coming period.

5.6. See part 2 for further information.

6.1. The foregoing sections of this report indicate that:

• the decisions requested of the Mayor concern the exercise of the GLA’s general powers, falling within the GLA’s statutory powers to do such things considered to further or which are facilitative of, conducive or incidental to, the promotion of economic development and wealth creation, social development or the promotion of the improvement of the environment in Greater London;

• in formulating the proposals in respect of which a decision is sought officers have complied with the Authority’s related statutory duties to:

o pay due regard to the principle that there should equality of opportunity for all people;

o consider how the proposals will promote the improvement of health of persons, health inequalities between persons and to contribute toward the achievement of sustainable development in the United Kingdom; and

o consult with appropriate bodies.

6.2. In taking the decisions requested, the Mayor must have due regard to the Public Sector Equality Duty; namely the need to eliminate discrimination, harassment, victimisation and any other conduct prohibited by the Equality Act 2010, and to advance equality of opportunity between persons who share a relevant protected characteristic (race, disability, sex, age, sexual orientation, religion) and foster good relations between persons who share a relevant protected characteristic and persons who do not share it (section 149 of the Equality Act 2010). To this end, the Mayor should have regard to section 3 (above) of this report.

6.3. Officers have indicated in paragraphs 1.22 and 1.26 of this report that the essential maintenance work required at NSC Crystal Palace and the market engagement work are covered by the current contracts in place with GLL and Max Associates respectively.

6.4. See part 2 for other legal considerations.